As the hospitality industry struggles to mitigate the massive loss of revenue caused by the coronavirus pandemic, hundreds of hotel owners are filing lawsuits to force their property insurance providers to cover their financial casualties.
Meantime, state and federal lawmakers are considering legislation that would mandate U.S. insurance companies pay for business losses related to COVID-19.
Such a payout could surpass $600 billion, reported Best’s Insurance in May.
American Property Casualty Insurance Association, a trade group, puts the payouts even higher. In June, the association reportedly estimated payouts to would cost insurers $255 billion to $431 billion a month.
The amounts are not sustainable and would ultimately make many insurers insolvent, say insurance industry experts.
Hotel owners say they deserve payouts because they’ve paid premiums for years to cover high-loss scenarios such as the one they’re facing now.
In almost every case, insurers are refusing to pay, saying policies exclude losses caused by a viral plague or COVID-19 has not caused any physical damage to hotel properties that result in a stoppage of business.
It’s fixing to be an epic battle.
In this episode of Lodging Leaders, we examine the issue of business interruption insurance for hotels negatively impacted by the coronavirus pandemic.
We feature Sanjay Patel, CEO of MHG Hotels in Indianapolis who has filed a lawsuit against his insurance provider; Robert Zarco, a partner at the law firm Zarco Einhorn Salkowski & Brito in Miami who specializes in litigating business interruption insurance claims on behalf of business owners; Gregory Riehle, a lawyer and hospitality consultant and former CEO of the Resort Hotel Association, a hotel insurance group; and Robert Hartwig, Ph.D., a clinical associate professor and director of finance at the Center for Risk and Uncertainty Management at the University of South Carolina’s Darla Moore School of Business who’s co-authored a white paper about the un-insurability of businesses affected by viral pandemics.
Resources and Links
It’s well known extended-stay-hotel and short-term-rental sectors have done better than their transient hotel counterparts during the coronavirus pandemic. Even before the crisis hit, residential-type accommodations were seeing a growth in interest from travelers as well as investors. The COVID-19 outbreak is proving mixed developments of hotel rooms, leased apartments and owned condominiums offer a unique value proposition during and after the pandemic. This report is part of Long Live Lodging’s ongoing coverage of the coronavirus crisis and its impact on the hotel industry.
The coronavirus pandemic is forcing the lodging industry to rethink health and wellness. Designers such as Blanche Garcia of B. Garcia Designs see this as an opportunity for hotels to revise their messaging beyond clean and safe by introducing wellness products and programs they can market and attract guests who want to feel good during their stay and return home feeling better than when they left. Those who promote healthy buildings as well as safe travel are exploring how implementing elements of wellness can be a cure for hotel businesses struggling to survive the COVID-19 pandemic and the subsequent economic downturn. This report is part of Long Live Lodging’s ongoing coverage of the coronavirus crisis and its impact on the hotel industry.